Extreme Networks sees revenues up after Enterasys acquisition

But California firm sees bigger loss in fiscal year

By Bob Sanders

Published: September 30, 2014

Extreme Networks’ acquisition of Enterasys Networks has added up to a huge increase in revenue, a big net loss and a hefty payout to Enterasys’ former CEO, according to recent filings with the Securities and Exchange Commission.

Extreme, headquartered in California, bought its former Salem-based rival on Oct. 31, 2013, for $180 million. The combined companies’ net revenue shot up in the fiscal year ending June 30 to $520 million, 74 percent more than the $300 million in sales during the previous year, but the company posted a loss of $57 million, or 60 cents a share.

Last year, Extreme (without Enterasys) posted a nearly a $10 million profit.

While total assets were up from $311 million, to $526 million, cash and equivalents and short-term investments fell from $138 million to $105 million. Those assets included $71 million in goodwill due to the sale. Over half of that goodwill was due to Enterasys’ technology.

Enterasys sales constitute approximately 44 percent of Extreme’s revenue and its assets account for 27 percent of the company’s total.

It took eight months to effectively merge Enterasys into the company and the transaction and integration costs thus far are about $25.7 million. That doesn’t count some $16.7 million in intangibles and a restructuring charge of $500,000.

A pro forma analysis, which combines the companies fiscal results from last year as if they were one company for comparison purposes, shows a decline in sales from $634 million to $619 million and a net loss of $71 million for all of fiscal 2014 (74 cents a share). That’s lower than the $38 million loss both companies would have experienced together in fiscal 2013.

One expense was the payout to former Enterasys CEO Chris Crowell, who was Extreme’s chief operating officer until he stepped down on May 6. Crowell’s compensation was $4.2 million, more than any other Extreme executive, including CEO Charles Berger, who earned $2.5 million (down from $3.1 million in fiscal 2013) for the full fiscal year.

Crowell’s payout included the acceleration of unvested stock options and restricted stock units accrued while at Enterasys and $673,900 severance payments.

This article appears in the October 3 2014 issue of New Hampshire Business Review